Use the Following Information to Answer Questions
EKPN Company

question 99

Multiple Choice

Use the following information to answer questions
EKPN Company prepared the following data in its static budget based on 150,000 machine hours: $\begin{array}{lr}\text { Direct Materials } & \$ 450,000 \\\text { Direct Labour } & 225,000 \\\text { Variable Overhead } & 1,125,000 \\\text { Fixed Overhead } & 2,100,000\\\\\text { Actual Results: } \\\text { Machine Hours } & \\\text { Direct Materials } & \$ 60,000 \text { hours } \\\text { Direct Labour } & \$ 475,000 \\\text { Variable Overhead } & 245,000 \\\text { Fixed Overhead } & 1,150,000 \\& 2,110,000\end{array}$
-What was the difference between the actual and budgeted Direct Material costs at the actual level of activity?

• A)$25,000 unfavourable
• B)$25,000 favourable
• C)$5,000 unfavourable
• D)$5,000 favourable

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Definitions:

Physical Inventory

The manual count of all merchandise or stock in a store or warehouse at a particular time.

Estimated Returns Inventory

A reserve of products anticipated to be returned by customers, accounting for potential future merchandise returns.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts and prepare the company’s books for the next period.

Perpetual Inventory System

An approach to inventory management where updates to inventory records are made in real-time after each purchase, sale, or return transaction.